**Exhibit 10.1**

 

**Change In Control Agreement**

 

THIS CHANGE IN CONTROL AGREEMENT (this “Agreement”) between Genaera Corporation, a Delaware corporation (the“Company”), and Roy C. Levitt (the “Employee”) is executed and effective as of August 27, 2004 (the “Effective Date). Certain capitalized terms used herein are defined in Section 21. 

 

**Witnesseth:********

 

WHEREAS, the Companyconsiders it to be in the best interests of its stockholders to encourage the continued employment of certain key employees of the Company notwithstanding the possibility, threat or occurrence of a Change in Control of the Company; 

 

WHEREAS, the Employee is a key employee of the Company; 

 

WHEREAS, the Company believes that the possibility of a Change in Control maycause the Employee to leave the Company for other opportunities or distract the Employee from performance of his/her duties to the Company, in either case to the detriment of the Company and its stockholders; 

 

WHEREAS, the Company recognizes that the Employee could suffer adversefinancial and professional consequences if a Change in Control were to occur; and 

 

WHEREAS, the Company wishes to enter into this Agreement to protect the Employee if a Change in Control occurs, thereby encouraging the Employee to remain in the employ of the Company and not to be distracted from theperformance of his duties to the Company by the possibility of a Change in Control. 

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 

 

Section 1. Other Employment Arrangements. 

 

(a) This Agreement does not affect the Employee’s existing or futureemployment arrangements with the Company unless a Change in Control shall have occurred before the expiration of the term of this Agreement. The Employee’s employment with the Company shall continue to be governed by the Employee’sexisting or future employment agreements with the Company, if any, or, in the absence of any employment agreement, shall continue to be at the will of the Board of Directors or, if the Employee is not an officer of the Company at the time of thetermination of the Employee’s employment with the Company, the will of the Chief Executive Officer of the Company, except that if (i) a Change in Control shall have occurred before the expiration of the term of this Agreement and (ii) theEmployee’s employment with the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) after the occurrence of such Change in Control, then the Employee shall be entitled to receive certainbenefits as provided in this Agreement. 

(b) Notwithstanding anything contained in this Agreement to the contrary, if following the commencementof any discussions with any person that ultimately results in a Change in Control, (i) the Employee’s employment with the Company is terminated, (ii) the Employee is removed from any material duties or position with the Company or (iii) theEmployee’s Base Salary is reduced, then for all purposes of this Agreement, such Change in Control shall be deemed to have occurred on the date immediately prior to the date of such termination, removal or reduction. 

 

(c) Nothing in this Agreement shall prevent or limit the Employee’scontinuing or future participation in any plan, program, policy or practice of or provided by the Company or any of its Affiliates and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as theEmployee may have under any contract or agreement with the Company or any of its Affiliates. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, program, policy or practice of or provided by, orany contract or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination of the Employee’s employment with the Company shall be payable of otherwise provided in accordance with such plan, program, policyor practice or contract or agreement except as explicitly modified by this Agreement 

 

Section 2.Change in Control of the Company. A “Change in Control” shall have occurred if, after the Effective Date: 

 

(i) Any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) is orbecomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the voting power of the then outstanding securities of the Company;

 

(ii) During any period of two consecutivecalendar years there is a change of 25% or more in the composition of the Board of the Company in office at the beginning of the period except for changes approved by at least two-thirds of the Directors then in office who were Directors at thebeginning of the period; 

 

(iii) Thestockholders of the Company approve an agreement providing for (A) the merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficiallyown, immediately after the merger or consolidation, shares entitling such stockholders to 50% or more of all votes (without consideration of the rights of any class of stock to elect Directors by a separate class vote) to which all stockholders ofthe corporation issuing cash or securities in the merger or consolidation would be entitled in the election of directors, or where the members of the Board, immediately prior to the merger or 

 

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consolidation, would not, immediately after the merger or consolidation, constitute a majority of theBoard of Directors of the corporation issuing cash or securities in the merger or consolidation, or (B) the sale or other disposition of all or substantially all of the assets of the Company, or a liquidation, dissolution or statutory exchange ofthe Company; or 

 

(iv) Any person hascommenced, or announced an intention to commence, a tender offer or exchange offer for 40% or more of the voting power of the then-outstanding securities of the Company. 

 

Section 3.Term of this Agreement. The term of this Agreement shall begin on the Effective Date and shallexpire on the first to occur of: 

 

(i) theEmployee’s death, the Employee’s Disability or the Employee’s Retirement, which events shall also be deemed automatically to terminate the Employee’s employment by the Company; or 

 

(ii) the termination by the Employee or the Company of theEmployee’s employment by the Company. 

 

The expiration of the term of thisAgreement shall not terminate this Agreement itself or affect the right of the Employee or the Employee’s legal representatives to enforce the payment of any amount or other benefit to which the Employee was entitled before the expiration ofthe term of this Agreement or to which the Employee became entitled as a result of the event (including the termination, whether by the Employee or the Company or automatically as provided in this Section 3, of the Employee’s employment by theCompany) that caused the term of this Agreement to expire. 

 

Section 4.Event of Termination for Cause. An “Event of Termination for Cause” shall have occurred if, after a Change in Control, the Employee shall have committed: 

 

(i) gross negligence or willful misconduct in connectionwith his duties or in the course of his employment with the Company; 

 

(ii) an act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company; 

 

(iii) intentional wrongful damage to property of the Company; 

 

(iv) intentional wrongful disclosure of secret processes or confidential information of the Company; or

 

(v) an act leading to a conviction of afelony or a misdemeanor involving moral turpitude. 

 

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For purposes of this Agreement, no act, or failure to act, on the part of the Employee shall be deemed“intentional” if it was due primarily to an error in judgment or negligence, but shall be deemed “intentional” only if done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his actionor omission was in the best interest of the Company. Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated as a result of an “Event of Termination for Cause” hereunder unless and until there shall havebeen delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the Board of Directors then in office at a meeting of the Board of Directors called and held for such purpose (afterreasonable notice to the Employee and an opportunity for the Employee, together with his counsel, to be heard before the Board of Directors), finding that, in the good faith opinion of the Board of Directors, the Employee had committed an act setforth above in this Section 4 and specifying the particulars thereof in detail. Nothing herein shall limit the right of the Employee or his legal representatives to contest the validity or propriety of any such determination provided that if themembership of the Board of has not changed in the manner described in Section 2. (ii) as of the date of said Board of Directors’ meeting, then the finding of the Board of Directors shall be final and not subject to contest. 

 

Section 5.An Event of Termination for Good Reason. An“Event of Termination for Good Reason” shall have occurred if after a Change in Control, the Company shall: 

 

(i) assign to the Employee any duties inconsistent with the Employee’s position (including offices, titles and reportingrequirements), authority, duties or responsibilities with the Company in effect immediately before the occurrence of the first Change in Control or otherwise make any change in any such position, authority, duties or responsibilities; 

 

(ii) remove the Employee from, or fail to re-elect orappoint the Employee to, any duties or position with the Company or any of its Affiliates that were assigned or held by the Employee immediately before the occurrence of the first Change in Control, except that a nominal change in theEmployee’s title that is merely descriptive and does not affect rank or status shall not constitute such an event; 

 

(iii) take any other action that results in a material diminution in such position, authority, duties or responsibilities or otherwisetake any action that materially interferes therewith; 

 

(iv) reduce the Employee’s annual base salary as in effect immediately before the occurrence of the first Change in Control or as the Employee’s annual base salary may be increased from time to time after that occurrence (the“Base Salary”); 

 

(v) relocate theEmployee’s principal office outside of the metropolitan area of Philadelphia, Pennsylvania; 

 

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(vi) fail to (x) continue in effect any bonus, incentive, profit sharing, performance,savings, retirement or pension policy, plan, program or arrangement (such policies, plans, programs and arrangements collectively being referred to herein as “Basic Benefit Plans”), including, but not limited to, any deferred compensation,supplemental executive retirement or other retirement income, stock option, stock purchase, stock appreciation, or similar policy, plan, program or arrangement of the Company, in which the Employee was a participant immediately before the occurrenceof the first Change in Control, or any substitute plan adopted by the Board of Directors and in which the Employee was a participant immediately before the occurrence of the last Change in Control, unless an equitable and reasonably comparablearrangement (embodied in a substitute or alternative benefit or plan) shall have been made with respect to such Basic Benefit Plan promptly following the occurrence of the last Change in Control, or (y) continue the Employee’s participation inany Basic Benefit Plan (or any substitute or alternative plan) on substantially the same basis, both in terms of the amount of benefits provided to the Employee (which are in any event always subject to the terms of any applicable Basic BenefitPlan) and the level of the Employee’s participation relative to other participants, as existed immediately before the occurrence of the first Change in Control; 

 

(vii) fail to continue to provide the Employee with benefits substantially similar to those enjoyed by theEmployee under any of the Company’s other employee benefit plans, policies, programs and arrangements (the “Other Benefit Plans”), including, but not limited to, life insurance, medical, dental, health, hospital, accident ordisability plans, in which the Employee was a participant immediately before the occurrence of the first Change in Control; 

 

(viii) take any action that would directly or indirectly materially reduce any other non-contractual benefits that were provided to theEmployee by the Company immediately before the occurrence of the first Change in Control or deprive the Employee of any material fringe benefit enjoyed by the Employee immediately before the occurrence of the first Change in Control; 

 

(ix) fail to provide the Employee with the number of paidvacation days to which the Employee was entitled in accordance with the Company’s vacation policy in effect immediately before the occurrence of the first Change in Control; 

 

(x) fail to continue to provide Employee with office space, related facilities and support personnel(including, but not limited to, administrative and secretarial assistance) (y) that are both commensurate with Employee’s responsibilities to and position with the Company immediately before the occurrence of the first Change in Control and notmaterially dissimilar to the office space, related facilities and support personnel provided to other employees of the Company having comparable responsibility to the Employee, or (z) that are physically located at the Company’s principalexecutive offices; 

 

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(xi) require the Employee to perform a majority of his duties outside the Company’sprincipal executive offices for a period of more than 21 consecutive days or for more than 90 days in any calendar year; 

 

(xii) fail to honor any provision of any employment agreement Employee has or may in the future have with the Company or fail to honor anyprovision of this Agreement; 

 

(xiii) giveeffective notice of an election to terminate at the end of the term or extended the term of any employment agreement Employee has or may in the future have with the Company in accordance with the terms of any such agreement; or 

 

(xiv) purport to terminate the Employee’s employment bythe Company unless notice of that termination shall have been given to the Employee pursuant to, and that notice shall meet the requirements of, Section 6. 

 

Section 6.Notice of Termination. If a Change in Control shall have occurred before the expiration of the term of this Agreement, anysubsequent termination by the Employee or the Company of the Employee’s employment by the Company, or any determination of the Employee’s Disability, shall be communicated by notice to the other party that shall indicate the specificparagraph of Section 7 pursuant to which the Employee is to receive benefits as a result of the termination. If the notice states that the Employee’s employment by the Company has been automatically terminated as a result of the Employee’sDisability, the notice shall (i) specifically describe the basis for the determination of the Employee’s Disability, and (ii) state the date of the determination of the Employee’s Disability, which date shall be not more than ten daysbefore the date such notice is given. If the notice is from the Company and states that the Employee’s employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, the notice shallspecifically describe the action or inaction of the Employee that the Company believes constitutes an Event of Termination for Cause and shall be accompanied by a copy of the resolution satisfying Section 4. If the notice is from the Employee andstates that the Employee’s employment by the Company is terminated by the Employee as a result of the occurrence of an Event of Termination for Good Reason, the notice shall specifically describe the action or inaction of the Company that theEmployee believes constitutes an Event of Termination for Good Reason. Each notice given pursuant to this Section 6 (other than a notice stating that the Employee’s employment by the Company has been automatically terminated as a result of theEmployee’s Disability) shall state a date, which shall be not fewer than 30 days nor more than 60 days after the date such notice is given, on which the termination of the Employee’s employment by the Company is effective. The date sostated in accordance with this Section 6 shall be the “Termination Date”. If a Change in Control shall have occurred before the expiration of the term of this Agreement, any subsequent 

 

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purported termination by the Company of the Employee’s employment by the Company, or any subsequent purporteddetermination by the Company of the Employee’s Disability, shall be ineffective unless that termination or determination shall have been communicated by the Company to the Employee by notice that meets the requirements of the foregoingprovisions of this Section 6 and the provisions of Section 9. 

 

Section 7.Benefits Payable on Change in Control and Termination. 

 

(a) If (x) a Change in Control shall have occurred before the expiration of the term of this Agreement, and (y) the Employee’s employment by the Company is terminated (whether by the Employee or the Company orautomatically as provided in Section 3) after the occurrence of that Change in Control, the Employee shall be entitled to the following benefits: 

 

(i) If the Employee’s employment by the Company is terminated (x) by the Company as a result of the occurrence of an Event ofTermination for Cause, or (y) by the Employee before the occurrence of an Event of Termination for Good Reason, then the Company shall pay to the Employee the Base Salary accrued through the Termination Date but not previously paid to the Employee,and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, including, but not limited to, the Basic Benefit Plans and the Other BenefitPlans, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). 

 

(ii) If the Employee’s employment by the Company is automatically terminated as a result of the Employee’s death, theEmployee’s Disability or the Employee’s Retirement, then (x) the Company shall pay to the Employee the Base Salary accrued through the date of the occurrence of that event but not previously paid to the Employee, and (y) the Employee shallbe entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, including, but not limited to, the Basic Benefit Plans and the Other Benefit Plans, which shall begoverned by the terms thereof (except as explicitly modified by this Agreement). 

 

(iii) If the Employee’s employment by the Company is terminated (x) by the Company otherwise than as a result of the occurrence of anEvent of Termination for Cause, or (y) by the Employee after the occurrence of an Event of Termination for Good Reason, then the Employee shall be entitled to the following: 

 

(1) the Company shall pay to the Employee the Base Salary and compensation for earned but unused vacationtime accrued through the Termination Date but not previously paid to the Employee; 

 

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(2) the Company shall pay to the Employee an amount equal to the product of (A) thehighest aggregate annual bonus, incentive or other payment of cash compensation in addition to annual base salary pursuant to any bonus, incentive, profit-sharing performance, discretionary pay or similar policy, plan, program or arrangement of theCompany paid or payable to the Employee (including any deferred portion thereof) for any fiscal year (or portion thereof) of the Company ending within three years of the Termination Date (the “Highest Bonus”), and (B) a fraction, thenumerator of which is the number of days in the current fiscal year of the Company through the Date of Termination and the denominator of which is 365; 

 

(3) the Company shall pay to the Employee, as a lump sum, an amount (the “Severance Payment”) equal to two (2) times the sumof: 

 

(A) the amount (including any deferredportion thereof) of the Base Salary that would have been paid to the Employee during the fiscal year of the Company in which the Termination Date occurs based on the assumption that the Employee’s employment by the Company had continuedthroughout that fiscal year at the Base Salary at the highest rate in effect at any time during the term of this Agreement; plus 

 

(B) the amount of the Highest Bonus; 

 

(4) the Company (at its sole expense) shall take the following actions: 

 

(A) throughout the Relevant Period, the Company shall maintain in effect, and not materially reduce thebenefits provided by, each of the Other Benefit Plans in which the Employee was a participant immediately before the Termination Date; and 

 

(B) the Company shall arrange for the Employee’s uninterrupted participation throughout the Relevant Period in each of such OtherBenefit Plans, 

 

provided that if the Employee’sparticipation after the Termination Date in any such Other Benefit Plan is not permitted by the terms of that Other Benefit Plan, then throughout the Relevant Period, the Company (at its sole expense) shall provide the Employee with substantiallythe same benefits that were provided to the Employee by that Other Benefit Plan immediately before the Termination Date; and 

 

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(5) the Employee shall be entitled to any other amounts or benefits provided under anyplan, policy, practice, program, contract or arrangement of or with the Company, including, but not limited to, the Basic Benefit Plans and the Other Benefit Plans, which shall be governed by the terms thereof (except as explicitly modified by thisAgreement). 

 

(b) Each payment required to be made to theEmployee pursuant to the foregoing provisions of this Section 7(a) above (i) shall be made by check drawn on an account of the Company at a bank located in the United States of America, and (ii) shall be paid (x) if the Employee’s employment bythe Company was terminated as a result of the Employee’s death, the Employee’s Disability or the Employee’s Retirement, not more than 30 days immediately following the date of the occurrence of that event, and (y) if theEmployee’s employment by the Company was terminated for any other reason, not more than ten days immediately following the Termination Date. 

 

Section 8.Successors. If a Change in Control shall have occurred before the expiration of the term of this Agreement, 

 

(i) the Company shall not, directly or indirectly,consolidate with, merge into or sell or otherwise transfer its assets as an entirety or substantially as an entirety to, any person, or permit any person to consolidate with or merge into the Company, unless immediately after such consolidation,merger, sale or transfer, the Successor shall have assumed in writing the Company’s obligations under this Agreement; and 

 

(ii) not fewer than ten days before the consummation of any consolidation of the Company with, merger by the Company into, or sale orother transfer by the Company of its assets as an entirety or substantially as an entirety to, any person, the Company shall give the Employee notice of that proposed transaction. 

 

Section 9.Notice. Notices required or permitted to be given by either party pursuant to this Agreement shallbe in writing and shall be deemed to have been given when delivered personally to the other party or when deposited with the United States Postal Service as certified or registered mail with postage prepaid and addressed: 

 

(i) if to the Employee, at the Employee’s address lastshown on the Company’s records, and 

 

(ii)if to the Company, Genaera Corporation, 5110 Campus Drive, Plymouth Meeting, Pennsylvania 19462, directed to the attention of the Company’s Secretary. 

 

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or, in either case, to such other address as the party to whom or which such notice is to be given shall have specifiedby notice given to the other party. 

 

Section 10.Withholding Taxes. The Company may withhold from all payments to be paid to the Employee pursuant to this Agreement all taxes that, by applicable federal or state law, the Company is required to so withhold. 

 

Section 11.Certain Additional Payments by the Company.

 

(a) Anything in this Agreement to the contrarynotwithstanding in the event it shall be determined that any payment or distribution by, or benefit from, the Company or any of its Affiliates to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant tothe terms of this Agreement or otherwise (any such payments, distributions or benefits being individually referred to herein as a “Payment,” and any two or more of such payments, distributions or benefits being referred to herein as“Payments”), would be subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any interest thereon, any penalties, additions to tax, or additional amounts with respect to such excise tax, and anyinterest in respect of such penalties, additions to tax or additional amounts, being collectively referred herein to as the “Excise Tax”), then the Employee shall be entitled to receive an additional payment or payments (individuallyreferred to herein as a “Gross-Up Payment” and any two or more of such additional payments being referred to herein as “Gross-Up Payments”) in an amount such that after payment by the Employee of all taxes (as defined in Section11(k)) imposed upon the Gross-Up Payment, the Employee retains an amount of such Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 

 

(b) Subject to the provisions of Section 11(c) through (i), any determination (individually, a “Determination”) required to be made under thisSection 11(b), including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall initially be made, at the Company’s expense, by nationally recognized tax counsel mutually acceptable to the Company and the Employee(“Tax Counsel”). Tax Counsel shall provide detailed supporting legal authorities, calculations, and documentation both to the Company and the Employee within 15 business days of the termination of the Employee’s employment, ifapplicable, or such other time or times as is reasonably requested by the Company or the Employee. If Tax Counsel makes the initial Determination that no Excise Tax is payable by the Employee with respect to a Payment or Payments, it shall furnishthe Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. The Employee shall have the right to dispute any Determination (a “Dispute”) within 15business days after delivery of Tax Counsel’s opinion with respect to such Determination. The Gross-Up Payment, if any, as determined pursuant to such Determination shall, at the Company’s expense, be paid by the Company to the Employeewithin five business days of the Employee’s receipt of such Determination. The existence of a Dispute shall not in any way affect the Employee’s right to receive the Gross-Up Payment in accordance with such Determination. If there is noDispute, such Determination shall be binding, final and conclusive upon the Company and the Employee, subject in all respects, however, to the provisions of Section 11(c) through (i) below. As a result of the 

 

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uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that Gross-Up Payments (or portionsthereof) which will not have been made by the Company should have been made (“Underpayment”), and if upon any reasonable written request from the Employee or the Company to Tax Counsel, or upon Tax Counsel’s own initiative, TaxCounsel, at the Company’s expense, thereafter determines that the Employee is required to make a payment of any Excise Tax or any additional Excise Tax, as the case may be, Tax Counsel shall, at the Company’s expense, determine the amountof the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to the Employee. 

 

(c) The Company shall defend, hold harmless, and indemnify the Employee on a fully grossed-up after tax basis from and against any and all claims, losses,liabilities, obligations, damages, impositions, assessments, demands, judgments, settlements, costs and expenses (including reasonable attorneys’, accountants’, and experts’ fees and expenses) with respect to any tax liability of theEmployee resulting from any Final Determination (as defined in Section 11(j)) that any Payment is subject to the Excise Tax 

 

(d) If a party hereto receives any written or oral communication with respect to any question, adjustment, assessment or pending or threatened audit,examination, investigation or administrative, court or other proceeding which, if pursued successfully, could result in or give rise to a claim by the Employee against the Company under this Section 11 (“Claim”), including, but not limitedto, a claim for indemnification of the Employee by the Company under Section 11(c), then such party shall promptly notify the other party hereto in writing of such Claim (“Tax Claim Notice”). 

 

(e) If a Claim is asserted against the Employee (“Employee Claim”),the Employee shall take or cause to be taken such action in connection with contesting such Employee Claim as the Company shall reasonably request in writing from time to time, including the retention of counsel and experts as are reasonablydesignated by the Company (it being understood and agreed by the parties hereto that the terms of any such retention shall expressly provide that the Company shall be solely responsible for the payment of any and all fees and disbursements of suchcounsel and any experts) and the execution of powers of attorney, provided that: 

 

(i) within 30 calendar days after the Company receives or delivers, as the case may be, the Tax Claim Notice relating to such EmployeeClaim (or such earlier date that any payment of the taxes claimed is due from the Employee, but in no event sooner than five calendar days after the Company receives or delivers such Tax Claim Notice), the Company shall have notified the Employee inwriting (“Election Notice”) that the Company does not dispute its obligations (including, but not limited to, its indemnity obligations) under this Agreement and that the Company elects to contest, and to control the defense or prosecutionof such Employee Claim at the Company’s sole risk and sole cost and expense; and 

 

(ii) the Company shall have advanced to the Employee on an interest-free basis, the total amount of the tax claimed in order for theEmployee, at the 

 

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Company’s request, to pay or cause to be paid the tax claimed, file a claim for refund of such taxand, subject to the provisions of the last sentence of Section 11(g), sue for a refund of such tax if such claim for refund is disallowed by the appropriate taxing authority (it being understood and agreed by the parties hereto that the Companyshall only be entitled to sue for a refund and the Company shall not be entitled to initiate any proceeding in, for example, United States Tax Court) and shall indemnify and hold the Employee harmless, on a fully grossed-up after tax basis, from anytax imposed with respect to such advance or with respect to any imputed income with respect to such advance; and 

 

(iii) the Company shall reimburse the Employee for any and all costs and expenses resulting from any such request by the Company and shallindemnify and hold the Employee harmless, on fully grossed-up after-tax basis, from any tax imposed as a result of such reimbursement. 

 

(f) Subject to the provisions of Section 11(e) hereof; the Company shall have the right to defend or prosecute, at the sole cost, expense and risk of theCompany, such Employee Claim by all appropriate proceedings, which proceedings shall be defended or prosecuted diligently by the Company to a Final Determination; providedhowever, that (i) the Company shall not, without theEmployee’s prior written consent, enter into any compromise or settlement of such Employee Claim that would adversely affect the Employee, (ii) any request from the Company to the Employee regarding any extension of the statute of limitationsrelating to assessment, payment, or collection of taxes for the taxable year of the Employee with respect to which the contested issues involved in, and amount of the Employee Claim relate is limited solely to such contested issues and amount, and(iii) the Company’s control of any contest or proceeding shall be limited to issues with respect to the Employee Claim and the Employee shall be entitled to settle or contest, in his sole and absolute discretion, any other issue raised by theInternal Revenue Service or any other taxing authority. So long as the Company is diligently defending or prosecuting such Employee Claim, the Employee shall provide or cause to be provided to the Company any information reasonably requested by theCompany that relates to such Employee Claim, and shall otherwise cooperate with the Company and its representatives in good faith in order to contest effectively such Employee Claim. The Company shall keep the Employee informed of all developmentsand events relating to any such Employee Claim (including, without limitation, providing to the Employee copies of all written materials pertaining to any such Employee Claim), and the Employee or his authorized representatives shall be entitled, atthe Employee’s expense, to participate in all conferences, meetings and proceedings relating to any such Employee Claim. 

 

(g) If, after actual receipt by the Employee of an amount of a tax claimed (pursuant to an Employee Claim) that has been advanced by the Company pursuantto Section 11(e)(ii) hereof the extent of the liability of the Company hereunder with respect to such tax claimed has been established by a Final Determination, the Employee shall promptly pay or cause to be paid to the Company any refund actuallyreceived by, or actually credited to, the Employee with respect to such tax (together with any interest paid or credited thereon by the taxing authority and any recovery of legal fees from such taxing authority related thereto), except to the extentthat any 

 

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amounts are then due and payable by the Company to the Employee, whether under the provisions of this Agreement orotherwise. If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 11(e)(ii), a determination is made by the Internal Revenue Service or other appropriate taxing authority that the Employee shall not beentitled to any refund with respect to such tax claimed and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 calendar days after such determination, then such advanceshall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of any Gross-Up Payments and other payments required to be paid hereunder. 

 

(h) With respect to any Employee Claim, if the Company fails to deliver anElection Notice to the Employee within the period provided in Section 11(e)(i) hereof or, after delivery of such Election Notice, the Company fails to comply with the provisions of Section 11(e)(ii) and (iii) and (f) hereof, then the Employee shallat any time thereafter have the right (but not the obligation), at his election and in his sole and absolute discretion, to defend or prosecute, at the sole cost, expense and risk of the Company, such Employee Claim. The Employee shall have fullcontrol of such defense or prosecution and such proceedings, including any settlement or compromise thereof. If requested by the Employee, the Company shall cooperate, and shall cause its Affiliates to cooperate, in good faith with the Employee andhis authorized representatives in order to contest effectively such Employee Claim. The Company may attend, but not participate in or control, any defense, prosecution, settlement or compromise of any Employee Claim controlled by the Employeepursuant to this Section 11(h) and shall bear its own costs and expenses with respect thereto. In the case of any Employee Claim that is defended or prosecuted by the Employee, the Employee shall, from time to time, be entitled to current payment,on a fully grossed-up after tax basis, from the Company with respect to costs and expenses incurred by the Employee in connection with such defense or prosecution. 

 

(i) In the case of any Employee Claim that is defended or prosecuted to a Final Determination pursuant to the terms of thisSection 11(i), the Company shall pay, on a fully grossed-up after tax basis, to the Employee in immediately available funds the full amount of any taxes arising or resulting from or incurred in connection with such Employee Claim that have nottheretofore been paid by the Company to the Employee, together with the costs and expenses, on a folly grossed-up after tax basis, incurred in connection therewith that have not theretofore been paid by the Company to the Employee, within tencalendar days after such Final Determination. In the case of any Employee Claim not covered by the preceding sentence, the Company shall pay, on a fully grossed-up after tax basis, to the Employee in immediately available funds the full amount ofany taxes arising or resulting from or incurred in connection with such Employee Claim at least ten calendar days before the date payment of such taxes is due from the Employee, except where payment of such taxes is sooner required under theprovisions of this Section 11(i), in which case payment of such taxes (and payment, on a fully grossed-up after tax basis, of any costs and expenses required to be paid under this Section 11(i) shall be made within the time and in the mannerotherwise provided in this Section 11(i). 

 

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(j) For purposes of this Agreement, the term “Final Determination” shall mean (A) a decision,judgment, decree or other order by a court or other tribunal with appropriate jurisdiction, which has become final and non-appealable; (B) a final and binding settlement or compromise with an administrative agency with appropriate jurisdiction,including, but not limited to, a closing agreement under Section 7121 of the Code; (C) any disallowance of a claim for refund or credit in respect to an overpayment of tax unless a suit is filed on a timely basis; or (D) any final disposition byreason of the expiration of all applicable statutes of limitations. 

 

(k) For purposes of this Agreement, the terms “tax” and “taxes” mean any and all taxes of any kind whatsoever (including, but not limited to, any and all Excise Taxes, income taxes, and employment taxes), together withany interest thereon, any penalties, additions to tax, or additional amounts with respect to such taxes and any interest in respect of such penalties, additions to tax, or additional amounts. 

 

Section 12.Expenses of Enforcement. If a Change in Controlshall have occurred before the expiration of the term of this Agreement, then, upon demand by the Employee made to the Company, the Company shall reimburse the Employee for the reasonable expenses (including attorneys’ fees and expenses)incurred by the Employee in enforcing or seeking to enforce the payment of any amount or other benefit to which the Employee shall have become entitled pursuant to this Agreement, including those incurred in connection with any arbitration initiatedpursuant to Section 20. To the extent that any such reimbursement would be subject to the Excise Tax, then the Employee shall be entitled to receive Gross-Up Payments in an amount such that alter payment by the Employee of all taxes imposed on suchGross-Up Payments, the Employee retains an amount equal to the Excise Tax imposed upon the reimbursement, and the other provisions of Section 11 hereof shall also apply to such circumstance unless the context thereof otherwise indicates. 

 

Section 13.Employment by Wholly Owned Entities. If, at orafter the Effective Date, the Employee is or becomes an employee of one or more corporations, partnerships, limited liability companies or other entities that are, directly or indirectly, wholly owned by the Company (“Wholly OwnedEntities”), references in this Agreement to the Employee’s employment by the Company shall include the Employee’s employment by any such Wholly Owned Entity. 

 

Section 14.No Obligation to Mitigate; No Rights of Offset. 

 

(a) The Employee shall not be required to mitigate the amount of any paymentor other benefit required to be paid to the Employee pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned by theEmployee as a result of employment by another person. 

 

(b) TheCompany’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which theCompany may have against the Employee or others. 

 

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Section 15.Amendment and Waiver. No provision of this Agreement may be amended or waived(whether by act or course of conduct or omission or otherwise) unless that amendment or waiver is by written instrument signed by the parties hereto. No waiver by either party of any breach of this Agreement shall be deemed a waiver of any other orsubsequent breach. 

 

Section 16.Governing Law.The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Delaware. 

 

Section 17.Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceabilityof any other provision of this Agreement, which shall remain in full force and effect. 

 

Section 18.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute the same instrument. 

 

Section 19.Assignment. This Agreement shall inure to thebenefit of and be enforceable by the Employee’s legal representative. The Company may not assign any of its obligations under this Agreement unless (i) such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled.

 

Section 20.Arbitration. Except as otherwiseexplicitly provided in Section 11, any dispute between the parties arising out of this Agreement, whether as to this Agreement’s construction, interpretation or enforceability or as to any party’s breach or alleged breach of any provisionof this Agreement, shall be submitted to arbitration in accordance with the following procedures: 

 

(i) Either party may demand such arbitration by giving notice of that demand to the other party. The notice shall state (x) the matter incontroversy, and (y) the name of the arbitrator selected by the party giving the notice. 

 

(ii) Not more than 15 calendar days after such notice is given, the other party shall give notice to the party who demanded arbitration ofthe name of the arbitrator selected by the other party. If the other patty shall fail to timely give such notice, the arbitrator that the other party was entitled to select shall be named by the Arbitration Committee of the American ArbitrationAssociation. Not more than 15 calendar days after the second arbitrator is so named, the two arbitrators shall select a third arbitrator. If the two arbitrators shall fail to timely select a third arbitrator, the third arbitrator shall be named bythe Arbitration Committee of the American Arbitration Association. 

 

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(iii) The dispute shall be arbitrated at a hearing that shall be concluded within tendays immediately following the date the dispute is submitted to arbitration unless a majority of the arbitrators shall elect to extend the period of arbitration. Any award made by a majority of the arbitrators (x) shall be made within ten daysfollowing the conclusion of the arbitration hearing, (y) shall be conclusive and binding on the parties and (z) may be made the subject of a judgment of any court having jurisdiction. 

 

(iv) All expenses of the arbitration shall be borne by the Company. 

 

The agreement of the patties contained in the foregoing provisions of this Section 20 shallbe a complete defense to any action, suit or other proceeding instituted in any court or before any administrative tribunal with respect to any dispute between the parties arising out of this Agreement 

 

Section 21.Interpretation. 

 

(a) As used in this Agreement, the following terms and phrases have theindicated meanings: 

 

(i) “Affiliate”and “Affiliates” mean, when used with respect to any entity, individual, or other person, any other entity, individual, or other person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or isunder common control with such entity, individual or person. 

 

(ii) “Base Salary” has the meaning assigned to that term in Section 5. 

 

(iii) “Basic Benefit Plans” has the meaning assigned to that term in Section 5. 

 

(iv) “Board of Directors” means the Board ofDirectors of the Company. 

 

(v) “Change inControl” has the meaning assigned to that phrase in Section 2. 

 

(vi) “Claim” has the meaning assigned to such term in Section 11. 

 

(vii) “Code” means the Internal Revenue Code of 1986, as amended from time to time. 

 

(viii) “Commission” means the United StatesSecurities and Exchange Commission or any successor agency. 

 

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(ix) “Company” has the meaning assigned to that term in the preamble to thisAgreement. The term “Company” shall also include any Successor, whether the liability of such Successor under this Agreement is established by contract or occurs by operation of law. 

 

(x) “Determination” has the meaning assigned tothat term in Section 11. 

 

(xi)“Dispute” has the meaning assigned to that term in Section 11. 

 

(xii) “Effective Date” has the meaning assigned to that term in the preamble to this Agreement. 

 

(xiii) “Election Notice” has the meaning assigned to such term in Section 11. 

 

(xiv) “Employee” has the meaning assigned to suchterm in the preamble to this Agreement. 

 

(xv)“Employee Claim” has the meaning assigned to such term in Section 11. 

 

(xvi) “Employee’s Disability” means: 

 

(A) if no Change in Control shall have occurred before the date of determination, the physical or mentaldisability of the Employee determined in accordance with the disability policy of the Company at the time in effect and generally applicable to its salaried employees; and 

 

(B) If a Change in Control shall have occurred at that date, the physical or mental disability of theEmployee determined in accordance with the disability policy of the Company in effect immediately before the occurrence of the first Change in Control and generally applicable to its salaried employees. 

 

The Employee’s Disability, and the automatic termination of theEmployee’s employment by the Company by reason of the Employee’s Disability, shall be deemed to have occurred on the date of determination, provided that if (1) a Change in Control shall have occurred before the expiration of theterm of this Agreement, (2) the Company shall have subsequently given notice pursuant to Section 6 of the Company’s determination of the Employee’s Disability and (3) the Employee shall have given notice to the Company that the Employeedisagrees with that determination, then (A) whether the Employee’s Disability shall have occurred shall be submitted to arbitration pursuant to Section 20, and (B) if a majority of the arbitrators decide that the Employee’s Disability hadnot occurred, at the date of determination by the Company, then (I) the Employee’s 

 

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Disability, and the automatic termination of the Employee’s employment by the Company by reason ofthe Employee’s Disability, shall be deemed not to have occurred, and (II) on demand by the Employee made to the Company, the Company shall reimburse the Employee for the reasonable expenses (including attorneys’ fees and expenses) incurredby the Employee in obtaining that decision. 

 

(xvii) “Employee’s Retirement” means (x) if no Change in Control shall have occurred before the date of the Employee’s proposed retirement, the retirement of the Employee in accordance with the retirement policy of theCompany at the time in effect and generally applicable to its salaried employees, and (y) if a Change in Control shall have occurred at that date, the retirement of the Employee from the employ of the Company in accordance with the retirement policyof the Company in effect immediately before the occurrence of the first Change in Control and generally applicable to its salaried employees. 

 

(xviii) “Event of Termination for Good Reason” has the meaning assigned to that phrase in Section 5. 

 

(xix) “Event of Termination for Cause” has themeaning assigned to that phrase in Section 4. 

 

(xx) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. 

 

(xxi) “Excise Tax” has the meaning assigned to that term in Section 11. 

 

(xxii) “Expiration Date” has the meaning assignedto that term in Section 3. 

 

(xxiii)“Final Determination” has the meaning assigned to such term in Section 11. 

 

(xxiv) “Gross-Up Payment” has the meaning assigned to that term in Section 11. 

 

(xxv) “Other Benefit Plans” has the meaningassigned to that term in Section 5. 

 

(xxvi)“Payment has the meaning assigned to that term in Section 11. 

 

(xxvii) “person” means any individual, corporation, partnership, joint venture, association, joint-stock company, limited partnership, limited liability company, trust, unincorporated organization,government, or agency or political subdivision of any government. 

 

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(xxviii) “Relevant Period” means a period beginning on the Termination Date andending on the first to occur of (x) the last day of the 24th calendar month immediately following the calendar month in which the Termination Date occurs, (y) the date on which the Employee becomes a full time employee of another person and (z) theEmployee’s normal retirement date, determined in accordance with the retirement policy of the Company in effect on the Termination Date. 

 

(xxix) “Severance Payment” has the meaning assigned to that term in Section 7. 

 

(xxx) “Successor” means a person with or intowhich the Company shall have been merged or consolidated or to which the Company shall have transferred its assets as an entirety or substantially as an entirety. 

 

(xxxi) “Tax” has the meaning assigned to that term in Section 11. 

 

(xxxii) “Tax Claim Notice” has the meaningassigned to that term in Section 11. 

 

(xxxiii)“Tax Counsel” has the meaning assigned to that term in Section 11. 

 

(xxxiv) “Termination Date” has the meaning assigned to that term in Section 6. 

 

(xxxv) “this Agreement” means this Change in Control Agreement as it may be amended from time to time in accordance with Section15. 

 

(xxxvi) “Underpayment” has themeaning assigned to that term in Section 11. 

 

(xxxvii) “Voting Stock” means shares of capital stock of the Company the holders of which are entitled to vote for the election of directors, but excluding shares entitled to so vote only upon the occurrence of a contingencyunless that contingency shall have occurred. 

 

(xxxviii) “Wholly Owned Entities” has the meaning assigned to that term in Section 13. 

 

(b) In the event of the enactment of any successor provision to any statue or rule cited in this Agreement, references in this Agreement to such statuteor rule shall be to such successor provision.****

 

(c) Theheadings of Sections of this Agreement shall not control the meaning or interpretation of this Agreement. 

 

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(d) References in this Agreement to any Section are to the corresponding Section of this Agreement unlessthe context otherwise indicates. 

 

IN WITNESS WHEREOF, theCompany and the Employee have executed this Agreement as of the date first set forth above to be effective as of the Effective Date. 

 

GENAERA CORPORATION

By:
 
/s/ John A. Skolas

Name:
 
John A. Skolas

Title:
 
EVP, CFO and General Counsel

“Employee”
  
/s/ Roy C. Levitt

Name: Roy C. Levitt

APPROVED:
Compensation Committee of the Board of Directors of GENAERA CORPORATION
By:
 
/s/ R. Frank Ecock

Name:
 
R. Frank Ecock

Title:
 
Committee Chairman

 

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